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Working Papers in Technology Governance and Economic Dynamics no. 51
the other canon foundation, Norway
Tallinn University of Technology, Tallinn
Ragnar Nurkse School of Innovation and Governance
CONTACT: Rainer Kattel, [email protected]; Wolfgang Drechsler, [email protected]; Erik S. Reinert, [email protected]
A Non-Autistic Approach to
Socio-Economic Problems:
Kathedersozialismus and the
German Historical School
Wolfgang Drechsler
May 2013
1. Why is this interesting?
The by now highly alternative, barely even heterodox economics that
dominated Germany, and in fact Continental Europe and much of the
world, between the late middle of the 19th Century and the early 20th and
that is at the basis both of the Social Market Economy and of much of
the modern Welfare State, is particularly interesting once we realize that
this is a particularly non-autistic approach to economic problems. Here,
the clear recognition of fundamental and pressing social issues – what
was called the “Social Question” – gave rise to the realization, by economists and many other intellectuals, that both the analysis of the problem
and the suggestion for remedies depend on method, and that method is
never neutral. Method shapes how we see reality; it determines the policy outcome – or at least it is employed and promoted by those who want
certain outcomes. And some methods, then as now (they are actually by
and large the same), preserve the status quo by calling any investigation
of what exists, what is wrong, and what should change, unscientific,
futile, and impossible. By doing so, one need not openly oppose reform
and development – it is enough if one creates a system within which
dealing with the real problems is delegitimized. The late 19th century
political attitude towards the Social Question, “Kathedersozialismus”, by
and large led the economists involved to focus on realism (rather than
abstraction), on relevance over precision, which by then had become a
choice to be made.
1
A more sophisticated, but also more specific, methodological approach,
“Historicism”, co-evolved with Kathedersozialismus into the “German
Historical School of Economics”, but the two are not the same. This
paper tries to sort out the relation between the various concepts, using
plenty of quotations from the erstwhile protagonists (translated into English, because the original German has long since ceased to be a relevant
language of scholarship in economics) , and keeping in mind that the issue
is applicability today.
2
1 Kathedersozialismus means “Socialism of the Lectern”; it is an originally pejorative term that
is intended to ridicule the perspective both by calling it socialist and by pointing to the fact that
its protagonists were mostly university professors (and thus, presumably, mere armchair intellectuals). Coined by the journalist H.B. (Bern­hard) Oppenheim (Boese 1939, 25; Lexis 1908,
27-28; see Brentano 1931, 76, 96), the term stuck, and like many a term meant critically
before, it was soon taken up by those who were criticized, although slowly and at first in quotation marks. There is no acceptable English translation, and so the word has been retained here
in German.
2 Translating the Kathedersozialisten is a challenge indeed, and it is even more difficult to do
it well. I have profited from Ingbert Edenhofer having undertaken this arduous task, and the
translations herein are largely his. Next to Ingbert, I am grateful for Rainer Kattel and Erik S.
Reinert for their critical input and to Erik especially for giving me access to his magnificent
library, where the core of this paper was written.
2
The German Historical School of Economics is part of a set of historical
schools in intellectual history; “historical” in this case means to study
historical data in order to learn about economic phenomena (as this is the
most scientific way to do it, because there are hardly any important
perennial, context-free truths in economics), not to believe in the inevitability of historical development. We will call it, in brief, “Historical School”
from now on. The Historical School, then, is generally grouped into three
waves. It was founded in the 1840s by Bruno Hildebrand (1812-1878)
with his Die Nationalökonomie der Gegenwart und Zukunft (1848), Karl
Knies (1821-1898) with his Die politische Oekonomie vom geschichtlichen Standpunkte (1883, new edn.), and Wilhelm Roscher (1817-1894),
the most eminent German economist of the mid-19th Century, author of
the magisterial System der Volkswirtschaftslehre (English translation
1878). This wave is called the Older Historical School, and Roscher was
at its helm. Friedrich List (1789-1846) was their predecessor, the first
one to analyse comparatively the economy of different nations. The
movement was taken over in the 1870s by the Younger Historical
School, the politically and theoretically most eminent and impactful
wave, which is what concerns us here and which is what we will mean
when we say Historical School later on. The third wave, usually called the
Youngest Historical School, which carries the movement into the 1920s
and beyond, is today most closely associated with Werner Sombart
(1863-1941), author of the trailblazing Der modern Kapitalismus (1987)
but also with his friend and competitor Max Weber (1864-1920), who
after all was by profession mainly an economics professor, and who
belongs to it to a good extent. (See Swedberg 1999)
3
4
5
6
Kathedersozialismus is mainly associated with the three eminent economists: Gustav v. Schmoller (1838-1917), Lujo Brentano (1844-1931),
and Adolph Wagner (1835-1917). Schmoller was, at the same time, the
leading German Historical School thinker and head of the Younger
School, and Brentano was one of its main figures, although he was less
sure about this association, whereas Wagner was clearly not. Schmoller
7
3 E.g. the German Historical School of Law closely associated with the legal scholar and Prus-
sian statesman Friedrich Carl v. Savigny (1779-1861), which is still extremely relevant; see R.
Backhaus 2013.
4 Roscher’s methods program is 1878, chapter III, sections XXII-XXIX, 102-116. On Roscher
from the Younger School’s perspective, see Brentano 1888, 2; Schmoller 1900, 1:117-118;
1888, vii-x, 147-171. On the three Older Historical School leaders see Schmoller 1900, 1:117;
1897, 383. Further on the three men and their emphases, see Balabkins 1988, 26-29; Lexis
1908, 36-38.
5 See Lexis 1908, 22-23; 1910, 243; Schmoller 1900, 1: 116-117; 1888, 102-106; 1913,
135-137.
6 On the transition, see Brentano 1931, 73-74; Schmoller 1900, 1: 118.
7 Generally, Nicholas Balabkins’ study – a combination of biography, explanation of work, and
impact study – is still the best single modern treatment of Schmoller in English. (1988)
3
and Wagner, during the height of their career, held the two main economics chairs in Berlin – then arguably the pre-eminent university in the world
–, and were the leaders of mainstream German economics. Brentano
taught in Munich and was more unconventional – more liberal, more
humanities-based, non-Prussian, Catholic – and, one has to admit, a less
distinguished economist, but from today’s perspective not a less impactful one, because it was mostly his students who were most important for
economic policy in the Federal Republic of Germany.
8
The relationship of the three men was neither easy nor always friendly or
even civil. It is fair to say that Wagner and Brentano disliked each other,
while Schmoller maintained a more or less cordial relation with Wagner
(see the re­spective birthday addresses, Schmoller 1913, 280-284, and
Wagner 1908), and a moderately good one with Brentano, which was,
given their very different views on so many things, the best one could
have hoped for. (See Brentano 1931, 96-99; 134; Stieda 1932, 23)
Schmoller was not a very social or leisure-oriented man, quite in contrast
to Brentano. (Brentano 1931, 106-107) All of them must not have been
very easy to get along with.
2. From today to Kathedersozialismus
Their work, however, while being locked into German, is easily accessible
for us today, because their times can be easily recognized. Just as when
their thoughts emerged, we are once again faced with a socio-economic
paradigm that holds so general sway that it has even bagged its natural
antagonists:
the economic train of thought of the Liberals gained such dominance over public opinion that even their opponents fell under its
influence. … The one glaring contradiction to the dominating
thought that the public saw was the Social Democratic program.
… Protective tariff was merely engaged in a rear guard battle. …
From the most democratic media …, everyone considered free
trade the natural truth, eternally valid for all peoples and all times.
Factory legislation was regarded as an outrageous abandonment
of civic freedom to the police despotism of an absolute regime.
This may just be the very End of History, as presented a quarter of a
century ago by Francis Fukuyama. (1989) Fukuyama says that our present sy­
stem is here to stay, not because a utopia is impos­
sible, but
8 On the specificity of Brentano’s approach, see, Kuczynski 1968, 347, 356; Curtius 1950,
135-136.
4
be­cause we have reach­ed the best and final so­ciety al­ready. According
to Fukuyama’s interpreta­tion of Hegel (2), li­beral democracy, joined with
economic liberalism, in its universali­
zation is that final form of human
society. It has no universal competi­tion any­more; its last one, Socialism,
having not survived the year of 1989.
Add to that blatant economization, deification of efficiency, and global
capitalism that is said to be scientifically inevitable, partially due to the
pressures of ICT, and opponents of such a view world-wide face a no-win
situa­tion, or so it seems. Clearly, though, this is a typical ideology, and
by definition, ideologies are wrong, because they are reduced perspectives of reality, reified by their believers because they cannot handle the
complexity of the latter. (See Kaiser 1984, esp. 27-28) Jürgen Habermas,
in his programmatic speech on the European Constitution, has summed
up this model of society as described
•• by the anthropological image of the human person as a rationally
deciding entrepreneur who exploits his or her own power of
labour;
•• by the socio-moral image of a post-egalitarian society which has
become resigned to margi­nalisation, warping, and exclusions;
•• by the economic image of a democracy which reduces its citizens
to the status of members of a market society and which redefines
the state as a service company for clients and customers;
•• finally by the strategic notion that there is no better politics/policy
than that which makes itself obsolete. (Habermas 2001)
The earlier quote, however, is by Lujo Brentano. (1931, 72-73) Referring
to the times well over a century ago, for the Berlin Empire rather than for
the Berlin Republic, it demonstrates problems similar to the ones we are
facing today. (See Peukert 1999, 445-446, 453) There are many differences as well, of course, and one of them is that the Social Democrats
have moved so far towards the centre that they have to a good extent
shot beyond it. A further problem is that not all, but much Third-Way
thinking today, as well as all kinds of “New Left” approaches, is antagonistically inclined against the one agency that was, and could again be,
built up against globalization and economization problems and for deve­
lopment, viz., the state (widely understood). Suffice it here to point at the
German historian Hans-Joachim Wehler’s remarks that the call of our time
is exactly that of the regaining of credible state rule, which globalization
and economization require more than ever. (2001)
5
3. Social Policy and Social Reform
Just as now, many people in the mid-19th century realized that there was
a problem in spite of the gen­eral opinion.
The idea of social policy or social reform as conscious acknowledgment of the necessity for state and society to be active in
bringing about a conciliation between the dispersing interests and
intents of the various social strata encompassed by the state was
familiar as early as the beginning of the 1860s to certain circles
in Germany that were limited at first. The progressing industrialization at that time with its accumulation of workers at certain
places as well as the agitation by Lassalle had alerted them, and
a form of literature that was reflecting rather than imminently or
even radically propagandistic in character had already established
itself next to socialistic literature. What was important afterwards
was the question of whether an effective organization was to be
created for a socio-political practical endeavour that somehow
matched this idea. (Boese 1939, 1)
Thus begins the history of the Verein für Socialpolitik, which became that
very institution, written on occasion of its dissolution in 1932 (it was
later re-founded and today still exists under that name, if not with the
same contents, as the main professional association of German-speaking
economists).
It was, in other words, clear that something was wrong, that the system
led to undesirable re­sults, and not only to those most concerned – the
workers, and those representing them – the Social Democracy, and especially Ferdinand Lassalle (1825-1864), it’s by far most important representative, Marx’ nemesis, largely forgotten except among experts today.
It was also of concern to most of those dealing with economic and social
is­sues academically, because, as I would argue, their main concern was
the welfare of the human person. In all naïveté, or so it would seem
today, that was the focal point of eco­nomics, not abstract modelling, and
this approach, together with some basic ethics, resulted in the cognizing
of a problem.
9
Even many “Anti-Kathedersozialisten” would have agreed with that proposition. (See, e.g., Wolf 1899, 20-22) However, the key here is that
9 It has to be admitted, of course, that this attitude would in those days not result in career
death, nor was academic employment, as Rainer Kattel has quipped, merely another middleclass way of earning a living, so that scholars simply expected to be poor, from a wealthy
background, or lucky.
6
while, whether Liberals or Socialists in our sense (including Social Democrats and Communists), they would have done so, their general answer
would be different – the former would say that the system actually will
eventually take care of the problem; the latter, that the entire structure,
the system, would need to be changed. The Kathedersozialisten basically liked the system – including German-style Monarchy – but saw it as
problem-ridden, so in order to preserve and purify it, there had to be
changes made through the system.
10
As regards the state, it is rarely men­tioned, both by the Kathedersozia­
listen themselves and by modern scholars dealing with them, that their
view of the state is almost completely Hegelian (their general ethics is
often associated linked to Kant, including by themselves). That is most
strongly so concerning Schmoller, even more than Wagner. Schmoller
understands the state not as taking indi­
vidual liberty away but rather
making it possible to begin with. (Priddat 1995, 92) There is, thus, absolutely no preference of the state over the individual. Precisely this is
proper Hegelianism – Hegel’s point in the Grundlinien der Philosophie des
Rechts (1921) is that the state that is the sphere of genuine Freedom,
including individual Free­dom. That means that the state as such is not
bad at all; nor is it, potentially, concretely. Realistically, reform can come
only come through the state, including the state at hand.
11
The impetus for these reforms – primarily social reforms – is thus both
ethical and system-preserving. It was clear that things had to be done;
otherwise, a revolutionary potential would explode. This is the approach
of reformism. As Schmoller put it, “all progress in history consists of
replacing revolution with reform.” (1904, 117) And Kathedersozialismus
can be understood precisely as the catchword for precisely those activities: The perception of the problem, the effort to ameliorate it by policy
measures, and the scientific, or better schol­
arly, approach to show
what is wrong. The policy measure would be that of social reform or
Social Policy.
Wagner’s student Heinrich Dietzel (1857-1935), not member of any
group but a very keen observer of the scene and an eminent social economist, defines Social Policy in this context thus:
10
Lassallian reformist Social Democracy actually is basically pro-state and even pro-nation
state and in that sense quite close to Kathedersozialismus, but it goes well beyond the latter as
regards economic reforms.
11 An exception is, e.g., Dietzel’s book on Karl Rodbertus (1805-1875), another Kathedersozia­
list and predecessor of Wagner (1886-1888). Concerning contemporary scholarship, this would
not be too surprising either, were not two important contemporary German rediscoverers of
Schmoller, Birger Priddat and Peter Koslowski, Hegel scholars as well. (But see Priddat 1995,
38, 87-89)
7
Social reform, in the widest sense, is the epitome of everything
that solidifies social peace by placating the present class struggle,
which predominantly revolves around material goods. In a narrower sense, social reform is the epitome of everything by which
the lower stratum of society, embittered against the prevailing
order, is to be rendered more content so that the threat of social
revolution is diminished. (Dietzel 1901, 3)
Turned into the positive, Schmoller’s definition is this: The general aim of
social reform
consists of the re-establishment of an amicable relationship
among the social classes, the abolition or reduction of injustice,
an enhanced approximation to the principle of distributive justice,
the creation of social legislation which furthers progress and gua­
rantees the moral and material elevation of the lower and middle
classes. (Schmoller 1904, 118)
Brentano tells the story from his perspective when he sums up the first
meeting of the Verein für Socialpolitik up thus: The members
were inspired by the thought that every person was an end in
himself, called upon to develop their abilities to the fullest. Already
Christianity had acknowledged every person as an end in himself.
This was the liberal idea which had sustained the emancipation of
the working classes since the end of the Middle Ages. Kant had
taught it in Königsberg, and in the most free development and
application of abilities and strengths, Stein and Hardenberg see
reason for hope and a basis for the future existence of the
Prussian state. However, in order to come closer to these ideal
goals, the workers needed to obtain the necessary tools. Managing
this became the goal of our social policy. (Brentano 1931, 78)
4. Method: Realism
But how to go about this on the scholarly level? The realist element, using
that very word, is emphasized again and again by all three main protagonists. What unites them is, as Brentano puts it, “striving for a theory of
economic life which matches the facts of life.” (Brentano 1923, vii)
However, if there is a science the subject of which is life as it
really is, it is economics. And a science of economics which only
holds true under circumstances that differ from real life may well
8
be highly interesting in theory … But a science of real life faces
other demands than those that can be met by a science which, in
order to gloss over the fact that its theorems do not correspond
to reality, constantly uses the excuse that it did not intend to correspond with real life and that it was content if the science was
right even if only under circumstances the insufficiency of which
it concedes. (Brentano 1919, 13-14)
Already Roscher had emphasized this:
We refuse entirely to lend ourselves in theory to the construction
of … ideal systems. Our aim is simply to describe man’s economic nature and economic wants, to investigate the laws and
the character of the institutions which are adapted to the satisfaction of these wants, and the greater or less amount of success by
which they have been attended. Our task is, therefore, so to
speak, the anatomy and physiology of social or national economy!
(1878, 1: 111)
Roscher begins his book, simply, with the statement, “The starting point,
as well as the object-point, of our science is Man.” (1878, 1: 52) This is
not obvious and was not, nor is it, typical. But why else do we do economics? Brentano explains further:
Starting and end point of the economy are not the goods but the
people, that was the opinion. The economy is not an end in itself;
its task is merely to provide human beings with the indispensable
means for developing their abilities and powers. The worker is a
human being, too. (Brentano 1931, 75)
Schmoller, in his 1897 Rektoratsrede, sums up:
Thus, a mere science of market and exchange, a sort of business
economics which threatened to become a class weapon of the
property owners, returned to being a great moral-political science
which examines both the production and the distribution of goods,
as well as both value and economic institutions, and which has its
central focus not on the world of goods and capital but on the
human person. (Schmoller 1897, 388)
And Brentano elucidates:
Lightning, too, hits where it strikes by virtue of natural law. Yet,
while civilized people make use of this natural law to render the
lightning bolt harmless with a lightning conductor, you wait for
9
the lightning flash to put your hut on fire, and then like savages,
you fall to your knees before the thunder god and pray to him:
only, the name of your thunder god is natural law. For you assume
that by pronouncing these words, your entire task in socio-political life was fulfilled. We, however, are of the opinion that one has
to use the natural laws in order to minimize pain and bitterness
while helping progress to reach its natural destination. (Brentano
1931, 75)
But the key is probably realism in relativity – Edwin A. Seligman (18611939), one of the founders of economics as a scholarly discipline, put it
best in what still seems to be the best English treatment of all these
phenomena,:
The truly historical mind will acknowledge, with Adam Smith, the
immense benefits of Cromwell’s navigation act, but will rejoice,
with Cobden, at the repeal of the corn-laws; he will praise, with
Gournay, the attempts to unshackle industry, but will deplore
Ricardo’s opposition to the factory acts; he will applaud Bentham’s
demolition of the usury laws, but will realize the legitimacy of
recent endeavours to avoid the unquestioned evil of absolute
­liberty in loans. He will, in one word, maintain the relativity of
theory; he will divest the so-called absolute laws of much of their
sanctity, and thus henceforth render impossible the baseless
superstition that all problems can be solved by appeal to the fiat
of bygone economists. (Seligman 1925, 17)
And Schmoller himself talks about the
absolutely wrong idea … which already List, Roscher, Hildebrand
and Knies so vehemently contested, namely the idea of a constant
standard form of economic organization above and beyond space
and time, culminating in free trade, free enterprise, and free real
estate commerce, only distortable by wrongful interference by
state and legislation, and beyond which no progress was possible.
(Schmoller 1904, 52)
This is the key to the issue: Things as they are, not things as they should
be – context does not only matter, it is the main point, and it determines
what economic policy is appropriate and what not in any given case –
i.e., what is right and what is wrong. Brentano says, “I think there are no
absolute economic ideals. To me, the ideal economic organization is the
one which corresponds to the concrete circumstances of a people as
perfectly as possible.” (Brentano 1931, 211) But also Wagner agrees: “I
have always, also in these matters and also recently, maintained the
stance of relativity.” (Wagner 1902, 9)
10
Schmoller speaks of “historical and other realistic research” (1900,
1:116), and says,
Recently, people have frequently claimed that the most significant
difference between more recent realistic national economy and
the older dogmatic and abstract variety was based on the diffe­
rence in the role that the newer school assigned to the state concerning economy. This holds true to a certain degree but not
without limitations; in some of the newer disputed issues, the
opposite is the case; thus, I posit that this is not the right distinction because the opposition lies deeper. (Schmoller 1904, 43)
12
Joseph A. Schumpeter (1883-1950), in his great essay on Schmoller, is
queasy about this claim:
I am caught in the embarrassing situation of finding a usable word
for Schmoller’s ‘direction’. ‘Exact’ or ‘realistic’ are unsuitable
because every scientific train of thought and every scientific
method, including all theoretical ones, are both out of necessity,
and because both words have misleading connotations.
Furthermore, the opposition of realistic-theoretical does not work
because Schmoller’s direction is ‘theoretical’ as well. If a word is
necessary for illustration’s sake, one can, with these reservations,
at least say ‘realistic’. (1926, 356, n. 1 (n. 1 is 355-356))
But this is an epistemological error of Schumpeter, who uses his own
private concept of science here. Of course, we can define science in
many ways, including some that do not pay heed at all to realism or
exactness – most current ones do not, including standard textbook economics (STE); they are self-referential. (See Drechsler 2011)
Or we can say that scientism and realism exclude each other. The point
is as follows: Natural science only represents, because of its own definition, i.e. systemically, a reduced part of human existence and experience.
Realism, however, focuses on what is, and thus any method that reduces
what is (including experiences) cannot be genuinely realistic. And
although many theories could be paraded out on why science cannot
cope with reality, Martin Heidegger summed it up especially beautifully:
“One stands in front of a blossoming tree. Only in a scientifically unguarded moment can one rightly experience its blossoming. In scientific per12 Schumpeter’s Schmoller essay of 1926 is still unrivalled in scope and quality as regards a
“reconstruction” of Schmoller, in spite of its many personal judgments, misperceptions, and
mistakes. In general, Schumpeter owed a lot to, and took from, Schmoller (which also becomes
obvious in this essay; see also Michaelides and Milios 2009).
11
spective, one will let drop the experience of the blossoming as something
naive.” (Summary by Safranski 1994, 458.) More detailed:
Everyday experience of things in a broader sense is neither objectivizing nor objectifying. If, e.g., we sit in a garden and take pleasure in a rose in full bloom, we do not turn the rose into an object,
not even into a thematic idea. Should I even find myself in silent
devotion to the shining red colour of the rose and ponder the redness of the rose, then this is not a thing or an object like the rose.
The rose is in the garden, maybe swaying in the wind. The redness of the rose is not in the garden, nor can it sway in the wind.
Nonetheless I think of it and speak of it by naming it. Thus, thinking and saying is possible in a manner that is neither objectivizing
nor objectifying. (Heidegger 1970, 73)
Further to Schumpeter, however, realism is a matter of motivation, of
impetus, of emphasis, of prioritizing – and I think it is fair to say that STE
is in the end not interested in the reality connex, at least not today, and
partially even avoids it, or is used by those who want to avoid it.
(Drechsler 2011) Wilhelm Lexis (1837-1914), another Kathedersozialist,
puts it very sharply thus:
Abstract theory may opine that its theorems do not even require
verification. For positivistic economics, i.e. one based on experience, on the other hand, verification is the decisive authority;
regularities inferred from deduction are viewed as assumptions as
long as they have not been proven by observations in real life.
Statistics provides the most exact method of observation and at
the same time, it offers measures to determine the limits within
which the theoretically deduced theorems correspond with experience. (Lexis 1908, 40)
The claim to realism is, then, what matters here; the desire to say something about reality. Brentano phrases it programmatically:
We do not set out to master life, neither by filling terminology
with the postulations we desire to deduce from them, nor by
chasing ideals that lie beyond reach. In determining the terms, we
strictly adhere to reality; in our aspirations, we are content if the
material conditions for a proper existence for everyone are created. (Brentano 1888, 4)
The basis of this is the insight of the relativity of the human person in
space and time. (1919, 18-19) And, to continue again with Schmoller,
“This is why I regard the theory of egotism or interest as the psycho-
12
logical, constant and regular source of all economic actions as nothing
but infinite superficiality.” (Schmoller 1904, 50) Humans do not maximize
profits; they at best maximize benefits as perceived – as Brentano
expresses in the famous anecdote in his autobiography which shows him
that this is a matter of time and place: “When I disembarked from the
boat which had taken us back from Capri to Naples and handed my suitcase to one of the boys who lay around on the pavement for him to
carry, he shook his head saying: I already ate!” (Brentano 1931, 113)
The ordo-liberal economist Erwin v. Beckerath (1889-1964) once said
that Schmoller’s “tendency towards ‘realpolitik’ occasionally, as in the
debate about protective duty and free trade, made him neglect the necessity of fundamental decisions in economic matters.” (Beckerath 1962,
71) But what could this necessity be? For Lexis, “realistic theory attempts
to adhere to concrete occurrences. Thus, it is forced to dissect the material under observation casuistically, in the process limiting the purview of
its theorems but at the same time increasing their applicability in future
cases.” (1910, 18-19)
5. Beyond Realism: The Historical School
The popularly-held assumption (to the extent that the present subject
matter is in a realm at all where anything can be called popular) is that
Kathedersozialismus, Social Policy motivated by the Social Question, and
the Historical School are so connected that they are somehow identi­cal.
This is very, very broadly true, but it is actually helpful to be more specific. We may say that Kathedersozialismus is the thought that is to a
good extent a reaction to the Social Question, and that its methodological
impetus is realism. However, how about the Historical School?
As was noticed, one does not need to be an economic historicist in order
to be a Kathedersozialist, but that in fact almost all historicists were Kathedersozialisten, and many Kathedersozialisten historicists. One must also
keep in mind that Schmoller and his specifically “ethical-historical”
research program link the historicism of the Younger Historical School
and Kathedersozialismus very directly, and as Schmoller is usually granted the helm of both movements, and as he also was the most influential
economist in academic policy at that time, this prompts one to conflate
the two concepts.
13
13 On the systematic connex of ethics and history in Schmoller, see for a good introduction
Shionoya 1997 and J.G. Backhaus 1994, esp. 9-16; cf. also Lexis 1910, 244; Priddat 1991.
On Wagner and ethics, see recently Corado and Solari 2010.
13
And what does the Historical School believe? Seligman sums it up thus
for the Older Historical School:
the new ideas first obtained a truly scientific basis about the
middle of the [19th] century, when three young German economists – Roscher, Knies and Hildebrand – proclaimed the necessity
of treating economics from the historical standpoint. They initia­
ted a new movement whose leading principles may be thus formulated: 1. It discards the exclusive use of the deductive method,
and stresses the necessity of historical and statistical treatment.
2. It denies the exis­tence of immutable laws in economics, calling
attention to the interdependence of theories and institutions, and
showing that different epochs or countries require different systems. 3. It dis­
claims belief in the beneficence of the absolute
laissez-faire system; it maintains the close in­
terrelation of law,
ethics and economics; and it refuses to acknowledge the ­adequacy
of a sci­entific explanation, based on the assumption of self-interest as the sole regulator of economic action. (1925, 15-16)
Wagner completely distanced himself from such views:
My scholarly opponents can by no means attack “Kathe­
dersozialismus” lock, stock and barrel, for there is not at all a
unified direction, neither in method nor in theory or the treatment
and direction of practical matters. In spite of criticism of its ideas,
many “Kathedersozialisten”, me among them, have never vehemently opposed classical national economics, especially its leading authorities, Smith, Ricardo, and Malthus. In my opinion, much
can be learnt from what classical national economics t­ eaches and
how it deals with things, more than from the “historical school”,
which dabbles in relativism to such an extent that it loses theoretical clarity and edge, as well as the practical ability of t­ aking a
stance on concrete matters as eternally weighing the “pros and
cons” does not lead to anything. (Wagner 1902, 18-21, FN 1,
19-20)
So, Wagner himself shows us – in addition to delivering a nice sketch
of the typical criticism of economic relativism – was not a historicist at
all (cf. Lexis 1908, 40-41); indeed, Brentano calls him “constantly
adhering to abstract method” (1931, 83; see 93), and Schmoller told
him, “But your innermost nature drew you to the ‘principles’, to abstract
theory, to the establishment of the system.” (1913, 281) We find some
methodological homogeneity even among the Kathedersozialisten, however, in the reaction against the classical view. (Cf. Salin 1951, 147;
Brandt 1993, 194) And “classical” is not an accidental term, as Brentano compares it to classical sculpture taste. (Brentano 1888, 2-4; see
14
also passim and 1919, 11 on classical economics) Wagner, however,
insisted on refining the classical school rather than building a new one.
(Wagner 1908, 5)
With Schmoller, the emphasis on change was much stronger. If one looks
at the theory de­scription part in his magnum opus, the Grundriß der allgemeinen Volkswirtschaftslehre (1900, 1: 111-124), one gets the idea
quite strongly. Schmoller sums up the goals of modern, i.e. his, economics like this:
14
1. The acknowledgment of the idea of development as the ruling
scientific idea of our era;
2. A psychological-moral consideration which takes drives and
emotions as a realistic basis, acknowledges moral powers and
regards all economics as a societal phenomenon due to morality
and the law, institutions and organizations;
3. Critical attitude towards both the individualistic concept of
nature and socialism, schools whose correct teachings should be
extracted and acknowledged while their wrong teachings should
be rejected; also the rejection of any class point of view; instead
clear aspiration to always support the common good and the
healthy development of nation and mankind. (Schmoller 1900,
1: 122)
We should read this very carefully, because almost no school of thought
has been so much maligned as Schmoller’s, and none suffers more from
a distorted image. Already Brentano claimed, “Schmoller condemned all
aspirations to discover necessary causality. This was a step backwards
to pre-Montesquieu times. In any case, Schmoller was more historiographer than national economist. This is proven foremost by his ‘Grundriß
der Nationalökonomie’.” (Brentano 1931, 99; cf. Salin 1951, 146-147
– on Salin on Schmoller, however, cf. Balabkins 1988, 77-78) But that is
simply not true – as Schmoller says, “valuable observation leads to
causal explanations. But observation always has to be at the beginning
and the completed causal explanation at the end of a scientific method.”
(Schmoller 1904, 297)
15
14 An excellent summary and interpretation of the Grundriß – the only useful one available in
English I know, and the book has not been translated – is Balabkins 1988, 53-67.
15 A survey of the reception of the Grundriß from its publication until some 30 years ago is in
Balabkins 1988, 67-76. A good recent example of throwaway Schmoller criticism is McCloskey
2013, a review of Boldizzoni 2011, a fortiori so because the latter almost doesn’t deal with
Schmoller at all.
15
6. Back to the present
What about Schmoller, Wagner and Brentano today? Compared to the
importance and success of their work and to their potential relevance as a
serious alternative to STE, especially in light of new social and economic
movements, and in spite of some serious blind spots as an almost complete
lack of attention to the role of Technology, the extent to which they remain
forgotten, or at least relegated to history rather than possible immediacy,
remains bizarre. The transposition of Schmoller into today’s (mainstream)
economics, however, would be quite tricky: “Sombart praised Schmoller for
his ‘vivid outlook on world and people’, his firm roots in philosophy and history. Today, this is less praise than reproach.” (Beckerath 1962, 71)
16
But there has been, first, something like a Schmoller renaissance since
the mid-1980s, with the works mostly published in English, even if it has
remained confined to a small, German-centred group. (See only Priddat
1995, 7; Giouras 1994, esp. vii-viii) And Jürgen Backhaus, perhaps the
most important protagonist of this renaissance, is right when he insists
on the necessity of Schmoller’s program today. (1993, esp. 9)
Second, we really have some excellent works during the last decade or
so, reintroducing the Historical School to, shall we say, the heterodox
mainstream – generally not by focusing on the School itself, but centrally using it and its legacy for their narratives and arguments. These are
the books by Geoffrey Hodgson (2001) and Ha-Joon Chang (2002)
(supplemented by a historical account, Grimmer-Solem 2003) and Erik S.
Reinert’s award-winning, truly brilliant book, How Rich Countries Got
Rich… And Why Poor Countries Stay Poor. (2007)
Priddat asks, “Should Schmoller and the economists of the ‘historical
school’ not have realized that their own economics would also fall prey
to historical relativism?” (1995, 40) Certainly, but first of all, he certainly
did, as Schmoller had “possessed the unparalleled self-denial of stressing
the relativity of his deeds every step along the way.” (Schumpeter 1926,
354) Second, we can say that politically – and that means as Kathedersozialist – he has been incredibly successful:
17
16 With the exception of Sombart, and even this is not especially strong compared with his
other work. (See 1967, in English for a change). But as Schumpeter is so closely linked with
the Historical School (see supra note 12), it is probably legitimate to borrow any Technology
theory, if needed in this context, from him.
17 In epistemological terms, Schumpeter sums up Schmoller’s program very nicely: “approaching the material with a minimum burden of a priori, thereby capturing interdependencies which
enter as additional a priori; this yields the (provisional) framework for investigation, a framework
that is further refined in a continuing interplay of subject matter and mental process.” (1926,
381-382; translation from J.G. Backhaus 1994, 5)
16
Schmoller was not a classroom economist, seeking eternal verities. He knew that he was place- and time-bound. He wanted to
save German masses from a violent, Communist-led revolution.
He feared the Marxists and he was not popular with the fashionable crowd of “progressive” leanings. As late as 1983, the pronouncement on Schmoller in America was that his methods “were
not fit to cope with theoretical problems.” As emphasized repeatedly, Schmoller’s concern was how to cope with the social fiasco
of the laissez-faire system. His concerns were the pressing social
problems of the day, not speculative hypotheses, or equations and
matrices on the blackboard. (Balabkins 1988, 81)
And in this, one has to admit – and even some enemies admit it, if with
a negative prefix (see e.g. Lövenich 1989, 538) –, Kathedersozialismus
achieved its goal. There arguably never was such a revolution in Germany, as in the longueish durée reform led to Social Policy and ultimately to
the Social Market Economy - concepts shared by the European Union, as
well as much of the Western world today (Kirkpatrick 1988), at least in
perfomative theory, but also to a large extent in reality, embattled by
crisis and competitors though it may be. In that sense, even if largely
forgotten, Kathedersozialismus is at the root of what probably most
people today perceive as the socio-economic order most desirable to live
in; indeed, towards which they would like presumably to develop.
7. Conclusion
Kathedersozialismus is not a method, but methodologically, it is characterized by a realistic impetus, based on the awareness that method matters and determines the outcome. The Historical School is a further
development, a spin-off, of this realism, which is followed by most but
not all Kathedersozialisten. Both are politically motivated by the Social
Question, which does not allow one to do economics as l’art pour l’art.
To what extent Social Policy should be undertaken in order to ameliorate
the problems at hand is a question of degree, not of principle; as is to
which extent “the system” should be modified – but it should be modified, not overturned or abolished. But, as Peter R. Senn has argued in this
context, if the final question of the social sciences is “what ought to be
done,” (1997, 128), one will certainly not find the answer on an empirical ba­sis alone.
What is to be learned from Kathedersozialismus is then that realism is a
question of attitude – and that social policy and economics belong
together: If the economic policy is all right, much less social policy is
needed to begin with. In order to find out what ought to be done, one
17
must find out what is first. And that was the focus of the Kathedersozia­
listen. Beyond that, and that is the legacy of the German Historical
School, the historical approach, as long as it remains a tool and not a
goal, is the best way to do so. In the end, as Lexis said, “The realistic
method – which always also makes use of abstractions – and the historical method do not conflict with each other but form necessary complements for each other.” (1910, 22-23)
The legacy of Kathedersozialismus is a form of economics as an integrated social science with the primary focus on the real life, on people
living in their world, and on improving their welfare to the extent that is
possible under those circumstances that cannot be changed – this is why
it is so non-autistic, indeed, the very opposite. This focus forces one to
consider methods that yield results that one can use. One has to steer
the way between the Charybdis of STE-type formalism and mathematisation, which become so abstract as to be self-referential, and the Scylla of
historical antiquarianism, i.e. the right tool becoming its own purpose –
and again, self-referentiality would set in. But once again, there arises the
Aristotelian necessary combination of insight and meliorism, or of epistemology and ethics. This is the key principle and challenge of the social
sciences, and one that is out of focus in early 21st-Century STE. Kathe­
dersozialismus addresses the different options and their implications in a
way that makes particularly apparent what should be done and what can
be done, marked by high context specificity, methodological realism, and
addressing social problems as they exist as the main focus of and reason
for it all. Seen thus, this legacy is as important today as it ever was.
18
18 The current working paper is based on Drechsler 2014, with a more general focus. I thank
Erik S. Reinert for the suggestion to present it like that in this format.
18
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22
Working Papers in Technology Governance and Economic Dynamics
The Other Canon Foundation, Norway, and the Technology Governance
program at Tallinn University of Technology (TUT), Estonia, have launched
a new working papers series, entitled “Working Papers in Technology
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1.Erik S. Reinert, Evolutionary Economics, Classical Development
Economics, and the History of Economic Policy: A Plea for Theorizing by Inclusion.
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42. Carlota Perez, Innovation systems and policy: not only for
the rich?
43. Peer Vries, Does wealth entirely depend on inclusive institutions and pluralist politics?
44. John A. Mathews, The renewable energies technology surge:
A new techno-economic paradigm in the making?
45. Andrés Cárdenas O’Farrill, Natural resource and service-based
export performance: Cuba after 1989
46. Ali Kadri, The Political Economy of the Syrian Crisis
47. Erik S. Reinert, Jacob Bielfeld’s “On the Decline of States”
(1760) and its Relevance for Today
48. Erik S. Reinert, Primitivization of the EU Periphery: The Loss
of Relevant Knowledge
49. Erik S. Reinert and Rainer Kattel, Failed and Asymmetrical
Integration: Eastern Europe and the Non-financial Origins of
the European Crisis
25
50. Wolfgang Drechsler, Three Paradigms of Governance and
Admini­stration: Chinese, Western and Islamic
51. Wolfgang Drechsler, A Non-Autistic Approach to Socio-Economic Problems: Kathedersozialismus and the German Historical School
The working paper series is edited by Rainer Kattel ([email protected]),
Wolfgang Drechsler ([email protected]), and Erik S. Reinert ([email protected].
ee), who all of them will be happy to receive submissions, suggestions or referrals.
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